Today was the third and last day of IRS oversight hearings conducted by the Senate Finance Committee. Wednesday, the panel heard from a parade of authors and taxpayers describing Gestapo-like practices by the IRS. Appearing this morning before Dolan were six past and present IRS employees who described a tax agency out of control.

"These have been very painful three days," Dolan said. "Painful because it distresses me greatly the mistakes we've made, to see the impact of those mistakes," he said. (224K wav sound)

Dolan pledged to write each IRS employee by next week "reminding them what their obligations are" toward taxpayers. Regional IRS commissioners will be ordered to review transcripts of this week's hearings, he promised, and a special task force assembled to consider any grievance that had been brought to the committee's attention.

"We won't quit until we're done," he pledged.

While contrite, Dolan also defended the IRS work force that he said "succeeds in doing a very complex job well." He urged senators to put the hearings "in the context of millions and millions of successful taxpayer interactions that IRS has each year."

Dramatic testimony

Earlier in the day, dramatic testimony came from six long-term employees, who appeared behind tall partitions that hid them from cameras, while their voices were manipulated electronically to further obscure their identities.

They fingered IRS management for fostering low morale, a hostile attitude toward taxpayers, and a preoccupation with achieving high collection statistics, even though the agency is banned by law from setting quotas.

It's "a systemic problem plaguing the agency," said Witness No. 3, a 35-year collection officer. "Its original mission of collecting tax revenues has now become incidental to the production of statistics," he said.

Dolan, saying "the data just doesn't bear that out," nevertheless allowed that "there's an extreme concern about the way goals and measures and statistics have found their way into the lives of everyday front-line employees and, presumably, their managers. And so without question I think there's work that has to be done there."

As a first step, Dolan said the IRS would no longer rank district offices based on tax-collection statistics.

A disregard for the law?

The six employees told senators of a culture of corruption at the IRS. In its zeal to improve statistics, Witness No. 1 said, IRS management routinely condones criminal violations of IRS guidelines.

"As only one taxpayer representative out of thousands across the country, I have seen dozens of taxpayers severely damaged and even made homeless by the IRS collection division. The true bottom line solution to resolving taxpayer abuses is IRS management," he said.

And the IRS needs to change how it treats its own, too, witnesses agreed. Sen. William Roth, the Delaware Republican chairing the proceedings, asked the panel how common management retaliation is against whistle-blowing employees.

"Very prevalent," said Witness No. 1. "Almost a knee-jerk reaction," said No. 2. "Almost on a daily basis," said No. 5. "I am not revealing my identity here today for fear I would run the risk of retaliation, not only for myself but for my colleagues with whom I work," No. 5 said.

All six agreed the IRS is incapable of reforming itself and required intervention.

"The culture of the IRS must change, and it will not change on its own," No. 1 said.

Added No. 6, a long-term criminal investigator in the IRS' criminal division, "I am not here today to hurt or bash this agency or the vast majority of hard-working dedicated career public servants... [but] I have seen the efforts by IRS management to try and heal itself and they are just window-dressing to appease you in Congress, while behind the shield of taxpayer secrecy, they shun public accountability and oversight, and so it's business as usual."

Part of the Finance Committee's mandate is IRS oversight, though some critics have questioned whether the Republican-led panel seeks to advance an anti-tax agenda by beating up the unpopular agency. But Republican and Democratic senators alike were deferential to today's witnesses, praising them for coming forward to testify.

New York Sen. Patrick Moynihan, the panel's ranking Democrat, noted that since 1962, despite the advent of computers and 70 percent more IRS employees, the agency has seen voluntary tax compliance drop from 97 percent to 83 percent.